All You Need to Know about Category 4 DIFC Investment Advisory License
Being one of the top ten global onshore financial centres, DIFC acts as a perfect base to meet the fast-growing demand for financial and business services in this region including advisory services.
Centrally located over 110 acres of land in the heart of Dubai, DIFC as an independent financial free zone provides a steady and secure platform for businesses and monetary organizations to penetrate the financially resourceful markets of the Middle East, Africa and South Asia region and cater to the growing demand of investment advisory services through the issuance of DIFC investment advisory license.
DIFC is an international financial hub that is ideal for investment firms, asset management companies and other financial institutions willing to explore and benefit from the world-class facilities and infrastructure in the region including banking, underwriting, mergers & acquisitions, venture capital, private equity, brokerage, trade finance, asset management, capital market and Islamic finance operations. A wide range of financing and investment options are available which enables the centre to attract huge investments from foreign investors desirous for DIFC company formation.
UAE Federal Decree No. 35 of 2004 issued legislation for the establishment of DIFC as a strategic vision of Dubai to expand its financial assets and attract foreign capital and investments in the region and since its inception the DIFC has been creating its own legal and regulatory framework for all civil and commercial matters.
The constitution of UAE and the country’s laws, both at Federal and Dubai levels, allow DIFC to establish its own civil and commercial legal framework, inclusive of financial services regulation and a courts system in line with international standards and principles of common law. For facilitating the growth and development of businesses, three independent bodies have also been established in DIFC including Dubai International Financial Centre Authority (DIFC), Dubai Financial Services Authority (DFSA) and Dispute Resolution Authority (DRA). While DIFC and DFSA establish regulations and standards, DRA administers justice and legal excellence within the DIFC.
What is Investment Advisory Services?
Investment advisory services are Financial Consultancy services where an individual or a firm advises professional or retail investors on financial products including Debentures, Shares and Warrants and arranges deals in Investments.
The Middle East, Africa and South Asia (MEASA) region has recently witnessed massive growth in demand for financial services and keeping in pace the requirements for professional services firms have also grown significantly.
As the financial services and advisory work became more specialized, sophisticated and customer-centric, a sense of urgency to explore these services has set in amongst these investors. Expanding trade and transactions between different jurisdictions have further fuelled investors’ sentiment.
DIFC is the financial hub in the MEASA region, provides the most suitable platform to the investment advisory firms for successfully catering to the increasingly growing market. Besides, DIFC also helps provide direct and free access to a large pool of local, regional and international clients.
The investment advisory services can mobilize their resources through their presence in DIFC and can achieve considerable competitive advantage while servicing their clients through DIFC investment advisory establishments.
Why Should you Choose DIFC for your Investment Advisory Services Firm?
What is the DIFC Investment Advisory License?
The type of business that an applicant wishes to engage in defines the category of license. If you wish to carry out financial consultancy services from the DIFC, you must submit an application to the DFSA for a DIFC investment advisory license.
To help simplify the authorization process, the DFSA has made three separate categories under category 4 DIFC- investment advisory license namely investment advisory, credit advisory and insurance advisory activities. Crowdfunding is another activity that has found its place under category 4. Generally the Category 4 DIFC investment advisory license is meant for dealing with professional clients; however, providing financial consultancy to retail clients is also allowed when sought during the licensing process or thereafter.
DIFC investment advisory license is normally applicable to a firm performing low-risk financial activities such as advising on investment instruments or arranging investments. However, the issuance of a category 4 license doesn’t necessarily mean that the firm will be allowed to carry out all other activities coming under Category 4 unless separate applications with complete details of activities are submitted to DFSA.
The Category 4, DIFC investment advisory license is basically for non-discretionary financial advising and investment arrangement activities and comes with the following details
- A Base Capital requirement of USD 10,000
- A Base Capital requirement of USD 140,000 for Crowdfunding Platform
Scopes
The type of business that an applicant wishes to engage in defines the category of license. If you wish to carry out financial consultancy services from the DIFC, you must submit an application to the DFSA for a DIFC investment advisory license.
To help simplify the authorization process, the DFSA has made three separate categories under category 4 DIFC- investment advisory license namely investment advisory, credit advisory and insurance advisory activities. Crowdfunding is another activity that has found its place under category 4. Generally the Category 4 DIFC investment advisory license is meant for dealing with professional clients; however, providing financial consultancy to retail clients is also allowed when sought during the licensing process or thereafter.
The Scope includes
- Arranging Deals in Investments
- Operating a Crowdfunding Platform
- Arranging Custody
- Advising on Financial Products e.g. stocks, warrants etc.
- Organizing Credit
- Insurance Management and Intermediation
- Fund Administration
- Arranging/Advising on Money Services
- Advising on Credit
- Operating an Alternative Trading System
- Trust Services
DFSA requires the investment advisory firms to be adequately staffed depending upon the scope and nature of the proposed product portfolio from the DIFC and the scale of operation.
It is recommended that the investment advisory firm appoints Directors, Senior Executive Officers, Internal Auditors, Finance officers, Risk Management officers including a separate executive solely for ensuring compliance and AML reporting. Outsourcing of DIFC compliance services is also permitted for firms under the DIFC investment advisory license.
As the capital requirement calculation for company incorporation is an arduous and complex process involving many different factors, it is recommended that firms engage a Dubai based PRO services firm for capital calculations and application processing.
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